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The competition watchdog has hinted it may further broaden its regulatory powers to look beyond Australia’s big four banks

Suncorp has urged the government to act on recommendations to improve transparency in the mortgage broking industry, as major banks are “increasingly taking control of the broker-originated home loan”.

In its submission to the Final Report of the Financial System Inquiry (FSI), Suncorp argues that greater transparency and pre-sale disclosure be introduced to ensure consumers understand the level of independence, or otherwise, when using mortgage brokers.

“The premise of a mortgage broker is that a consumer can receive an objective and independent assessment of what is the best housing loan available for their needs,” the submission states.

“It should be recognised that consumers utilise mortgage brokers in order to receive personal, independent advice and as such, brokering advice should be clear and transparent as to incentive structures and product and adviser salesforce ownership.”

This is becoming more urgent as the ownership and distribution of banking products is becoming increasingly concentrated, according to the non-major.

“At question is the transparency of the ownership structures behind the products, mortgage broking networks and aggregator platforms and the incentive schemes driving sales. About 50% of Australia’s mortgage customers are seeking impartial advice on the best product for them from aggregator groups.

“In the past six years the major banks have acquired regional bank brands and are increasingly taking control of the broker-originated home loan market through their acquisition of aggregator businesses.”

The non-major also added that even if a broker is impartial as to the volume of loans directed to competing banks, the broker can reward their owner bank by directing a higher proportion of quality loans, i.e. those with LVRs less than 80%.

“These models have implications for consumers seeking independent information on the best mortgage for them. Customers may be unaware that advice and commission structures are tied to specific providers and there is also little transparency about the product provider relationship in many cases," the submission stated.

COMMENTS

by Part time believer9/04/2015 8:39:03 AM

I agree to a point with the gist of the article but ....1) not all sub 80% loans are quality! 2) I think Suncorp are paranoid about what deals gets sent to the majors. A lot of their low lvr low risk deals would be from their prop channels.

by EQ Broker9/04/2015 8:40:23 AM

While I agree that the big banks are increasingly taking ownership of smaller lenders and aggregators, I deny the premise that this is at the value proposition of a broker. Yes the profits may be more and moreso ending up in the hands of the big four but what does my customer care where the profits go so long as the loan is suitable to them and a good deal for them. As a broker I can still choose from a number of products and different policy options which my customers have needs for - my problem will be if the big 4 banks start imposing stricter policy on their smaller lending subsidiaries - driving business their way in an unfair way. You already have the big four be able to circumvent Genworth policy at their policy discretion where smaller lenders can not as an example.

by Craig Budden9/04/2015 9:05:49 AM

I think Suncorp need to look a little closer to home if they're not getting their share of the market. They actually dropped off the radar for a long time, as their product/rate offering wasn't competitive. Only recently have they sharpened their pencil to attract business under 80% LVR, & so they have started getting some business from us again where appropriate.When you're not doing very well, sometimes the easiest thing to do is blame everyone else for you're short comings.